Stocks bounced back from their losses on Tuesday with some pretty solid gains on Wednesday. All four of the main indices moved higher on the day with the Dow leading the way with a gain of 0.93%. The Nasdaq was close behind with a gain of 0.90%. The S&P and Russell lagged slightly, but still managed gains of 0.82% and 0.79%, respectively.
All 10 of the main sectors moved higher on the day with two notching gains over one percent. The consumer discretionary sector led the way by moving up 1.92% after solid earnings from Target. The tech sector jumped 1.15% as the second leading performer.
[hana-code-insert name=’adsense-article’ /]The smallest gain of the group came from the consumer staples sector at 0.30%.The financial sector tacked on 0.38% and that was the second smallest gain.
After four straight positive results from my scans, the tides turned yesterday.
There were six bullish signals and 24 bearish signals.
The barometer fell sharply once these results were added in to the equation, but it remained solidly in positive territory.
The final reading on Wednesday was 47.6, down from 88.7 on Tuesday.
After four straight bullish trade ideas, I felt we needed a little bearish exposure—plus there were far more stocks to choose from on the bearish list. Enbridge (NYSE: ENB) appeared on the bearish list and has average fundamentals with a downward trend on its chart. The EPS rating is 58 and the SMR rating is a C.
The stock has been trending lower from its peak in May with a series of lower highs and lower lows. The lower rail connects more neatly than the upper rail, but we also have the 50-day moving average in the same vicinity of the upper rail. In July the stock managed to move slightly above the 50-day and the upper rail before falling.
Buy to open the October 35-strike puts on ENB at $1.60 or better. These options expire on October 18. In order for these options to double the stock will need to drop to $31.80. The stock dropped to $31.19 in early August, so it won’t have to break to a new low. I suggest a target gain of 100% with a stop at $34.50.
— Rick Pendergraft
[hana-code-insert name=’oxford 1′ /]